Hong Kong's Cathay Pacific Airways Ltd has said that it will issue HK$6.74 billion ($869.51 million) of convertible bonds to shore up liquidity.
The five-year bonds will be dilutive to existing investors, representing 10.89% of the company's enlarged capital once they are converted into shares.
The bonds have an initial conversion price of HK$8.57 a share, which is a 30% premium to its last closing price before the issue was announced, and will carry a coupon rate of 2.75%, the airline said in an announcement to Hong Kong's stock exchange.
Earlier this week, Cathay Pacific warned that its passenger capacity could be cut by approximately 60%, its cargo capacity will fall by 25% and its monthly cash burn may rise if Hong Kong enacts new COVID-19 measures that would require flight crew to quarantine for two weeks upon their return home.
The airline said that the expected move would increase monthly cash burn by approximately HK$300 million to HK$400 million, on top of the current HK$1 billion to HK$1.5 billion.
Freight carrier FedEx Corp will temporarily relocate its Hong Kong-based pilots to San Francisco because of the expected hotel quarantine requirements for flight crew, it said in a memo to crew.
To help bolster its balance sheet while international borders remain closed, last June Cathay Pacific received a $5 billion rescue package led by the Hong Kong government.
Diluted Stakes
Assuming full conversion of the bonds and the Hong Kong government's exercise of warrants, top shareholder Swire Pacific Ltd's stake in Cathay Pacific will be diluted to 37.9% from 45% and Air China Ltd's stake will fall to 25.3% from 30%.
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